Date of Withdrawal Payment vs. Date of Withdrawal Valuation
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Date of Withdrawal Payment vs. Date of Withdrawal Valuation Ellen wrote.....
Our partnership agreement sets the date
of withdrawal as the date of the meeting at which the letter of resignation is
received and the valuation as the valuation for that meeting. We must pay the
withdrawal within 90 days. The check clears through the broker at some later
date. I have entered the withdrawal in club act. as follows: I
process the withdrawal on the date of withdrawal, showing the payment from the
suspense account, creating a negative balance in the suspense act. This way club
act. shows the correct valuation amount and withdrawal date. Then I enter the
check when it clears the brokerage account as a transfer from broker account to
suspense. This shows the actual payment on the correct date. Is there anything
wrong with doing it this way?
Yes, there is a bit of a problem as a result
of entering the transaction in this manner. For tax purposes the IRS will
consider the date of withdrawal as the date in which the funds/stock was
actually issued/transferred to the withdrawing member. Entering the
transaction in the manner that you have prescribed in either NAIC Club
Accounting or bivio will cause the withdrawal to be reported as though it
occurred as the withdrawal valuation date, not the date that the funds were
actually transferred. This situation becomes particularly relevant
when this difference in time transgresses the end of the tax year causing the
withdrawal to be reported in the wrong tax year or where it means that the
member has been with the club longer than a year prior to receiving withdrawal
payment, yet the gain associated with the withdrawal is reported
inappropriately as a short term gain.
bivio does allow you to enter this
type of withdrawal transaction without such problems. When you enter a
withdrawal into bivio you are asked to identify both a
Withdrawal Transaction Date and a Withdrawal Valuation Date. The
former would be the date of payment of the withdrawal while the later would be
the date that the withdrawal was valued per your partnership
agreement.
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